Two of the tallest office towers in the city show the potential and the challenges of Calgary’s downtown office market.
Last month, Telus Corp. marked the opening of its new 60-storey Calgary headquarters. The $400-million skyscraper, Telus Sky, has been in development for nine years and is now the third-tallest building in downtown Calgary. It features 750,000 square feet of office and retail space as well as 326 rental homes. Telus is the major office occupier, with space for 1,600 employees.
This month, Shell Canada announced it will move into the landmark Bow Tower, taking 242,257 square feet in the second tallest building in the city. The move from the Shell Centre, however, left a 315,000 square foot hole in the downtown office market, notes a report in the Real Estate News Exchange (Renx.ca)
Shell’s current head office is located at 400 4th Ave. SW, with 557,198 rentable square feet at Cadillac Fairview‘s Shell Centre. The estimated timeline for moving into the Bow tower space is mid to late 2023, the company reports.
The 774-foot-high Bow, with nearly two million square feet of space in the heart of the downtown, was a $1-billion project by energy giant Encana (now rebranded as Ovintiv) and H&R REIT and completed in 2012. Ovintiv remains the anchor tenant.
The Bow tower sold last year for $608 per square foot to Oak Street Capital Real Estate of Chicago, and Deutsche Bank in a deal that closed in the second quarter of 2022 at $1.26 billion.
The Bow has the highest amount of space available in downtown Calgary, with 329,929 square feet of sublease space.
Calgary’s downtown office sector continues to face challenges, CBRE noted in its Q2 Calgary Downtown Office Report.
CBRE data indicates the downtown vacancy rose by 90 basis points from the first quarter to 33.7 per cent, a historic high, with 380,000 square feet of negative absorption in the second quarter.
Still, investors continue to invest in the future of Calgary’s office sector.
Seven Calgary office building sales closed during the second quarter, adding $56.5 million to the year-to-date total of $1.34 billion. Outside of The Bow transaction, just under $123 million was invested; substantially higher than the $69.2 million and $57.5 million invested at mid-year 2019 and 2021, respectively and approaching the $174 million invested at mid-year 2020, according to The Network, a Calgary market analyst.
As of June 30, six office transactions had closed above $10 million, indicating that an appetite for bigger-ticket properties remains. The largest sales among these - aside from The Bow - are the $18.4 million sale of 339 - 9th Avenue SE to Calgary Technologies by Calgary Municipal Land Corporation (CMLC) and the $16.8 million sale of 555 – 4th Avenue SW to a Vancouver investor.